Laws Governing Coops

Most farmer cooperatives, petroleum cooperatives, utility cooperatives, and consumer food cooperatives are organized under Chapter 499 of the Code of Iowa. A very few were organized under older laws (Chapters 497 or 498) and did not convert to Chapter 499 after it was created by the Iowa Legislature in 1935. Credit Union cooperatives are organized under Chapter 533. Some cooperatives, most of them farmer cooperatives, were organized under the general business corporation law in Iowa, which is now found in Chapter 490, but operate much the same way as cooperatives organized under cooperative laws. They meet requirements in federal law to be treated by the federal government as cooperatives but are not required to meet all of the provisions found in the state’s cooperative laws. Because they are not organized under a cooperative law, however, they are not permitted to use the word “cooperative” in their name.

n 1996, a new law was passed which provided the structure for “closed,” or “new generation” cooperatives owned by farmers. This law is Chapter 501.

In 1998, another new law affecting cooperatives was passed which provides additional choices of organizational structures for farmers wishing to engage in livestock and poultry production without being held to the same limits found in Iowa’s Corporate Farming Law as other organizations must meet which do not meet the specified standards for farmer ownership. This law is Chapter 10. It is an enabling law, however, not a law under which companies are organized.

In 2005, Chapter 501A, a new law was passed that allows a cooperative to organize on a partnership model similar to a Limited Liability Company.  This law allows a cooperative to have both patron and non-patron members.  It creates a business structure option that enables patron members to access equity capital from non-patron investors to assist them in capitalizing the cooperative.

For links to Iowa Code relating to coop laws, check out the following links:

Chapter 499

Chapter 533

Chapter 501

Chapter 10

Chapter 501A